Your salaries tax can be paid in 2 installments, in January and April of the following year separately.
Examples
A. I earned a salary of $40,000 and contributed $1,500 to a Mandatory Provident Fund (MPF) Scheme per month as from 1 October 2015. How is Salaries Tax computed for 2015/16?
| Year of Assessment 2015/2016 |
| Income ($40000 x 6 months) |
$240,000 |
| Less: MPF contributions ($1,500 x 6 months) |
($9000) |
| Net Total Income |
$231,000 |
| Less: Basic allowance |
($120,000) |
| Net Chargeable Income |
$111,000 |
|
|
| Progressive Rate |
|
| Salaries Tax payable – First $80,000 (2-7% progressive) |
$3,600 |
| Balance $31,000 x 12% |
$3,720 |
| Salaries Tax payable at progressive rate |
$7,320 |
|
|
| Standard Rate |
|
| Salaries Tax at standard rate $231,000 x 15% |
$34,650 |
|
|
| Salaries Tax payable (the smaller amount) |
$7,320 |
| Less: 75% Tax reduction (capped at $20,000*) |
($5,490) |
|
$1,830 |
(*Note – Government Tax Refund) For 2015/16, 75% of the final tax payable under profits tax, salaries tax and tax under personal assessment would be waived, subject to a ceiling of $20,000 per case.
B. Do I have to pay Provisional Salaries Tax (PST) for 2016/17?
Yes, the Salaries Tax demand note for you consists of two components:
| 2015/16 Salaries Tax |
$1,830 |
| 2016/17 PST |
$44,100 |
| Total Salaries Tax Payable |
$45,930 |
Calculation of PST for 2016/17 is based on the income for 2015/16, but grossed up to 12 months, as follows:
| Year of Assessment 2016/2017 |
| Income ($40000 x 12 months) |
$480,000 |
| Less: MPF contributions ($1,500 x 12 months) |
($18,000) |
| Net Total Income |
$462,000 |
| Less: Basic allowance |
($132,000) |
| Net Chargeable Income |
$330,000 |
|
|
| Progressive Rate |
|
| Salaries Tax payable – First $120,000 (2-12% progressive) |
$8,400 |
| Balance $210,000 x 17% |
$35,700 |
| PST payable at progressive rate |
$44,100 |
|
|
| Standard Rate |
|
| Salaries Tax at standard rate $462,000 x 15% |
$69,300 |
|
|
| PST payable (the smaller amount) |
$44,100 |
C. Questions A& B show that my total tax payable is $45,930 (Salaries Tax required 2015/16 [$1,830] + Provision Salaries Tax 2016/17 [$44,100]– Provision Salaries Tax 2015/16 [$0]. When do I pay? Do I pay by two instalments?
Normally you would be asked to pay the sum of $45,930 by 2 instalments as follows:
|
Amount Payable |
Due date |
| 1st instalment |
$34,905 ($1830 + $44,100 x 75%) |
Around Jan 2017 |
| 2nd instalment |
$11,025 ($44,100 x 25%) |
Around April 2017 |
By 1 January 2017 you would have earned income for 9 months to 31 December 2016 (75% of annual income). By 1 April 2017 you would have earned income for the 12 months to 31 March 2017. Hence, paying provisional tax is not paying tax in advance, nor paying tax on future income.
